Locked in a cell: Wireless users punished for canceling early

Lawndale resident Julian Torres' cellphone experience will be familiar to many wireless customers.

Dissatisfied with the frequency of dropped calls and roaming charges, Torres, 40, recently decided to switch service providers. Of course, that meant a big, fat fee for early termination of his contract -- in this case, $150.

Then came the added insult: The fancy cellphone Torres had purchased from his former wireless provider couldn't be used with his new one. It contained software that prevented it from making or receiving calls on any other network.

"My kids play with it now," Torres said.

If a class-action lawsuit making its way through the California court system prevails, cell-phone customers may no longer have to put up with either punitive termination fees or "locked" handsets.

The lawsuit, Gatton vs. T-Mobile, was given a green light by the California Supreme Court the other day to be heard by a lower court. T-Mobile had earlier sought to have the suit killed, arguing that the company's contracts require customers to submit to arbitration and bar them from pursuing class-action lawsuits.

A state trial judge and a state appeals court subsequently ruled that the public interest would be served by having the case heard in court. The high court declined without comment to hear T-Mobile's appeal, clearing the way for the case to proceed.

At the heart of the matter is whether T-Mobile has a right to collect a termination fee of as much as $200 from customers or whether such a fee constitutes an unfair business practice.

The lawsuit also would require T-Mobile to disclose details of its practice -- in line with much of the wireless industry -- of blocking cellphones from being used with other providers and allow people to keep using their handsets even if they switch carriers.

If successful, the suit could have a far-reaching effect on all cellphone companies, potentially putting an end to termination fees and locked handsets. This, in turn, could make the wireless market far more competitive.

"These practices are basically designed to prevent a consumer from canceling a contract, no matter how dissatisfied they are," said Jeannine Kenney, a senior policy analyst at Consumers Union.

"Wireless companies should be competing on price and the quality of their service, not by locking customers in with high fees and frozen handsets," she said.

A T-Mobile spokeswoman declined to comment on the pending litigation.

Late last year, Verizon Wireless announced a new policy of having its $175 termination fee decline by $5 a month. The longer you're a Verizon customer, in other words, the lower a fee you'll pay should you decide to jump ship.

This month, Verizon said it would allow customers to change wireless calling plans without having to extend their existing contract or sign a new one. These aren't the most pro-consumer moves you'll ever see, but they're steps in the right direction.

AT&T followed suit by announcing it would have a similar policy for calling-plan changes as of November. And by early next year, the company said, it too would introduce a sliding scale for termination fees.

"Our customers have told us they want a more flexible approach," said Lauren Garner, an AT&T spokeswoman. "That's why we're doing this."

She added that the company blocks cellphones from working with other providers' networks "to ensure that customers experience the best service."

However, AT&T will unlock a handset for use elsewhere if requested to do so after a contract has expired or termination fees have been paid, Garner said.

You probably didn't know that. I've never heard AT&T or any other wireless company promote such a service, and I couldn't find any mention of it in AT&T's customer contract.

A Verizon spokesman, meanwhile, said the company did not deliberately block its handsets from being used on other networks. But because of technical incompatibility, he said, the company's phones won't work with either AT&T's or T-Mobile's services.

It's possible you can persuade a wireless company to provide the code needed to unlock a handset (you can say you're traveling abroad and need to use a foreign carrier's SIM card). Or you can try to buy a code online. They're available for about $25 from a wide variety of sites.

But no one should have to go to such trouble. It's your cellphone. You bought it. You own it. The notion that you can't use it as you please is ludicrous.

The most prominent example of a locked handset these days is Apple's snazzy iPhone. You can spend $399 to make an iPhone your very own. But if you don't use it on AT&T's network, it won't work.

Attempts to hack the iPhone to make it work with other carriers' networks resulted in Apple releasing software that crippled unlocked phones.

The reason for this is obvious: Wireless companies and cellphone manufacturers cut deals that allow them to share revenue. Wireless companies say they need termination fees and locking software because they subsidize much of the handset costs for customers.

In fact, few really know how much a cellphone costs -- there's virtually no retail market for the things. In the case of the iPhone, AT&T is not known to be subsidizing sales, yet the usual fees and restrictions apply.

If the lawsuit against T-Mobile accomplishes nothing else, the light it sheds on this practice will hopefully spur calls from consumers for change (and perhaps legislation to bring such change about).

I asked Torres, whose locked cellphone is now a kid's toy, whether current policies favor customers in any way. He laughed.